Haughton and Khandker
5
identify large households as being disproportionately poor; however, if there are economies of scale in consumption, this measure would overstate poverty among large households. Indeed, a measure of adult equivalence that makes a strong allowance for economies of scale might find that large households are less poor than average. In the Vietnamese case, the poverty rate for households with five or more members is 27 percent using expenditure per capita, and 23 percent using economies of scale expenditure; but for households with just one or two members, the poverty rate is 11 percent if one uses expenditure per capita, and 28 percent using the economies of scale expenditure measure. In every case the mean poverty rate over the whole sample is, by construction, 20 percent. Table 5.4 identifies the 20 percent poorest Vietnamese using our three measures of welfare. About a tenth of those identified as poor using expenditure per capita would not be poor using the other measures; and about a tenth of those identified as poor using OECD expenditure or economies of scale expenditure would not be poor using expenditure per capita. This is a relatively modest level of disagreement, suggesting that measures of poverty in Vietnam in 2006 were fairly robust to the choice of method used for dealing with adult equivalence, assuming the goal is to identify who is poor.
Choice of Poverty Line and Poverty Measure The choice of a poverty line, and the associated poverty measure (for example, the headcount index P0 or the poverty gap index P1), is arbitrary. However, if the various measures of poverty (introduced in chapter 4) tell the same story, it does not much matter which measure one chooses because they are close substitutes for one another. There are times, especially when we are comparing poverty over time, when the choice of poverty measure might matter. For instance, suppose there is a change— an increase in the price of a staple crop, for example—that has the effect of making Table 5.4 Classifying the Poor Using Alternative Measures of Welfare, Vietnam, 2006 Percentages OECD expenditure Not poor Poor Expenditure per capita Not poor Poor Total Number of observations
92
Source: VHLSS06.
78.4 1.6 80.0 7,351
1.6 18.4 20.0 1,838
Economies of scale expenditure Not poor Poor 77.8 2.2 80.0 7,350
2.2 17.8 20.0 1,839
Total 80.0 20.0 100.0
Number of observations 7,351 1,838